Nine years to meet MDG target: Can Indonesia do it?
Supplement - March 22, 2006

Nila Ardhianie, Contributor, Jakarta

This year's International Water Day may be the right time to evaluate how much Indonesia has achieved in the Millennium Development Goal (MDG) in the water sector. Is Indonesia on the right track so that by 2015 at least 69 percent of the population will haveaccess to clean drinking water?

If Indonesia reaches the target, it means that 69 percent of the population will have access to piped drinking water that has sufficient and sustainable pressure 24 hours a day by 2015, just nine years from now.

To reach this goal, over the next nine years, the government will need no less than Rp 43 trillion (US$5 billion), 25 percent of which will come from the government and the remainder from the private sector.

Agoes Widjanarko, director general of housing, building, planning and urban development of the Ministry of Public Works, seems convinced that Indonesia will be able to reach its MDG target. He often says that one of his working priorities is to ensure that all water companies in all regions are in sound condition and that by Jan. 1, 2008, it is hoped these companies can supply drinking water that it can be drunk straight from the tap.

To help achieve this goal, various aid programs from the World Bank and the Asian Development Bank have been carried out over the past few years. These include the Urban Water Supply Project and the Urban Water and Sanitation Improvement. In essence, these programs support regional water companies to ensure that they can provide good services so that the public willingly accepts being charged higher water rates. Thus, regional water companies can focus on ensuring an ample water supply, which in the past could not be done because the cost of water treatment exceeded the rates charged, therefore making expansion impossible.

Up to the end of 2005, Indonesia had 318 regional water companies. However, only 38 of them (12 percent) are considered financially sound. Given that most regional water companies are financially unsound, it is obvious that providing sufficient drinking water to the entire population is a very difficult challenge for the government. Will it be possible to turn these financially unsound regional water companies into financially sound firms in just nine years, especially considering that over the past few years various restructuring efforts in this regard have always proved fruitless?

Since the World Water Forum III in Kyoto and the launching of Report from Camdessus Panel, there has been a tendency for governments of many countries to only consider one source of funding for the development of a drinking water system and sanitation, namely the private sector. In the past decade, debates about the water sector have always been geared toward how to raise the role of the private sector in the supply of water the world over. Various promotional efforts have been made by international financial institutions, developed countries and other donors. In fact, according to a report issued by the Trans National Institute and the Corporate European Observatory, Public Water for All: Role of Public-Public Partnerships, it is still the private sector that provides over 90 percent of the funds for the supply of water worldwide.

Even in Indonesia, Palyja, a company owned by Suez Environment from France and which has a 25-year contract to supply water in the western part of Jakarta, is still looking for fresh private funds through the sale of bonds on the Surabaya Stock Exchange. In late 2005, it raised Rp 650 billion from the public to pay off debts with the European Investment Bank and other commercial banks. The bonds, with a tenure of between two years and seven years, will, upon maturity, be bought back by Palyja with funds obtained from the public through the payment of water bills by Jakarta residents.

Potential in the hands of the public

In many countries, including Indonesia, partnerships between public institutions in the water sector has continued to show promising results. Regional water companies in Medan, North Sumatra and several other similar companies in surrounding regions have successfully forged mutually beneficial partnerships.A collective public partnership in Cochabamba, Bolivia, started supplying water following the 2000 failure of private companies to meet demands in this region. For failing to provide excellent services despite continually increasing water rates, these private water companies were driven out of Bolivia. The public obtained very tight control over this matter and got elected to the board of the regional companies. Local politicians also lend strong support to public water companies, which are given access to local funds for investment and the expansion of water networks to include more people.

In Savelungu, Ghana, public water companies cooperating with the community have reliable services. In this part of the world, water companies only have to deliver water in bulk to local people who then handle the distribution to individual homes. The local people are responsible for determining water rates as well as for drawing up plans for new water connections, maintenance of distribution channels and payment collection from fellow locals. Models of cooperation between the government and the public have also been successful in Venezuela, Argentina and Bangladesh.

The Public Services International Research Unit of the University of Greenwich has said that the range of cooperation that is not aimed at making a profit may be conducted by a number of players and may take the form of the following: 1) a partnership between two public authorities; 2) a partnership between public authorities and the community; 3) the development of a partnership with an international dimension; 4) international associations.

As services provided by the public turn out to be very promising, the Indonesian government should also give equal attention and priority to two players that supply drinking water, namely the private sector and the public. In this respect, however, the government should not be overly optimistic that the private sector will invest heavily in the water sector and therefore should not devote all of its attention to the private sector while there is another alternative that requires only a little support to produce optimum results. The improvement and expansion of public water delivery should be considered as a possible key element to achieving the MDG target.

This alternative also includes drinking water supplies in the form of packaged or bottled water, which is quite popular in urban Indonesia. In Japan, various local drinking water companies also produce packaged water so that the profit obtained from consumers of bottled water, which retails for more than tap water,can be invested to improve tap water services. This cross subsidy allows the population of various economic levels to eventually obtain optimum drinking water services.